Sales tax proves to be vulnerable

Legislators, school officials fight to keep Education Fund legal

Several events over the past few years served as reminders that the city's half-cent sales tax for education is not built on a rock-solid foundation.

But never has the unique school funding mechanism been threatened as it was last week when state Rep. Keith King, R-Colorado Springs, introduced legislation that would outlaw the Steamboat Springs School District from accepting revenue from the tax.

King's proposed legislation, buried seven pages into a school finance bill, sent Superintendent Donna Howell and school district attorney Richard Lyons to the state Capitol in Denver, where private meetings with King and others failed to prevent the provision from being included in the bill.

And while Rep. Al White, a Winter Park Republican who represents Steamboat, expressed confidence the provision would disappear with an amendment scheduled to be proposed Monday, the possibility of losing the $1.8 million a year generated by the tax has forced district officials to fear the worst.

Howell recently said all district programs would have to be evaluated if the sales tax revenue is taken away. Inevitably, district class sizes would increase and classroom technology would suffer, she said.

It's no coincidence class sizes and technology precipitated the formation of the Education Fund more than a decade ago.

'We were in a pickle'

Millie Beall remembers well the "parking lot meetings" of 1993.

Precipitated by massive school-district budget cuts -- in excess of $1 million -- over the previous couple of years, Beall and other concerned community members were desperately searching for additional funding for Steamboat schools.

"We were in a pickle," Beall said. "The class sizes were at 28 (students per teacher), which was huge. We had no computers, and the rest of the world was taking off. We didn't want to fall behind."

Funding ideas were proposed, and the focus turned to tax revenue that could be dedicated for education in the county. But laws prevented Routt County from raising its property taxes to create additional revenue for all three county school districts, Beall said.

A city sales tax to support Steamboat's public schools eventually emerged as the best proposal. Attorneys confirmed its legality, and the group went to the city with the proposal.

The City Council didn't oppose or support the measure, Beall said.

"Their decision was to leave it up to the voters," she said. "It wasn't like they took a stand."

The voters did take a stand in '93. Referendum C passed easily, and the half-cent sales tax was established.

"It wasn't a hard sell, but quite frankly, I didn't think any of us thought it would pass the first time," Beall said.

Once the sales-tax increase was approved, the real work began.

People including Beall, Brian Kelly and Jim Gill worked with attorneys to craft the bylaws that would govern the Education Fund and its board.

Important all along was the need to keep separate the Fund Board, which oversees the tax revenue, and the school district. The Public School Finance Act forbids school districts from using a sales tax to generate revenue. But the revenue from Steamboat's half-cent sales tax is governed by the nonprofit Fund Board, which in turn "gifts" the money to the school district for specific programs.

"We really did scour to make sure it was legal," Beall said. "In everybody's best thought process, it was legal. It's not a lot different than a foundation. It was additional dollars coming into the school district."

Gill, who has been the Fund Board's president for nearly its entire existence, remembers well the lengthy process of crafting bylaws and establishing the nonprofit Education Fund.

For many years, the legality of the half-cent sales tax was never challenged -- at least not publicly -- even though people across the state and nation knew of its existence, Kelly said.

"I wouldn't consider it secret by any means," said Kelly, a former Fund Board member and founder of the Just Good Cents Committee that campaigned for the tax. "A lot of people have known about it."

Those people include lawmakers, Kelly said.

"They probably had more pressing issues for their home constituents," he said.

'You can't operate on fear'

The first two real threats to the Education Fund arose several years ago. One was an Eagle County effort to institute a property-tax increase with revenues going to public schools in the area, former superintendent Cyndy Simms said.

A state lawmaker proposed legislation that would have stopped both that effort and Steamboat's half-cent sales tax, Simms said, but White was able to amend the language to exclude an impact to Steamboat.

"That was really a scare," Simms said.

At about the same time, a Steamboat resident threatened a lawsuit to stop the half-cent sales tax because he was upset revenue from the Education Fund wasn't being used as he desired. A lawsuit was never filed.

The incidents reminded those involved with the Education Fund that challenges could continue to surface in the future, but Kelly said it didn't change the way the Fund Board operated or thought.

"At some point, you can't operate on fear," he said.

When the school district's stance against a Montessori charter school began to attract statewide attention, some people, including Jeff Troeger, openly questioned the School Board's handling of the issue.

One of Troeger's concerns was having people, including politicians, from across the state looking into the school district. Troeger was elected to the School Board last year.

Now, many people in Steamboat are convinced King's proposal is a direct response to the way the school district handled the charter school issue, taking a stance opposed by Gov. Bill Owens.

"I think it would be naÃive to think it didn't have something to do with the charter school issue," Kelly said.

King adamantly denies any connection.

The district is receiving widespread support in its fight against the proposed legislation from organizations including the Colorado Association of School Boards, the Colorado Municipal League and even the League of Charter Schools.

King has supporters, too. Last Thursday, the Oak Creek Town Board voted unanimously to support the legislative provision. Many in South Routt think revenues from the sales tax they pay when shopping in Steamboat should be shared with other county school districts.

Gill said district grants writer Lynne Myers, whose salary is paid by the Education Fund, has provided the South Routt School District more than $1 million through various grants.

Which side of supporters gets what it wants could become clearer Monday, when the House Education Committee is expected to hear amendments and vote on the school finance bill.